Business in Brazil: The South American Economic Superpower
by Jorge Chavez on February 05, 2015
Brazil has enjoyed growth and economic expansion, becoming the world’s sixth-most populous nation and seventh-largest economy during the first decade of this century. As the largest country in Latin America, doing business in Brazil has never been a more appealing for foreign businesses. Rife with natural resources, strong exports, and a burgeoning middle class, Brazil is fast becoming the South American economic superpower. While Brazil’s sheer size and booming consumer market undoubtedly make it a tantalizing business prospect, the country is home to a variety of unique traditions, regulations, and procedures with which future international partners need to be familiar.
The Waiting Game of Brazilian Bureaucracy
Brazilian bureaucracy is a well-known obstacle for foreign businesses trying to open up operations in South America. The added time and cost of doing business there is sardonically referred to as the custo Brazil. According to a 2012 World Bank report, it takes on average 13 procedures and 119 days of work to start a business in Brazil, with construction permits typically requiring an average 17 procedures and 469s days before authorization. Starting a business requires approval from no less than twelve government agencies, which can result in substantial costs to obtain multiple copies of all required documentation. The debt collection process comes with an extra unfamiliar step, as payments are typically made using a unique method know as boleto bancário. The boleto, or “ticket” in English, is a financial document issued by Brazilian bank that can be used in nearly every kind of financial transaction. In Brazil, where many citizens don’t have bank accounts and are wary of sending checks through the mail, boletos are extremely commonplace and foreign collectors would be well advised to familiarize themselves with this distinct payment method. To avoid undue delays and the potential loss of a competitive edge, businesses, collectors and accounts receivable managers should be well-prepared, educated, and willing to approach unfamiliar situations with patience and diligence.
Brazilian law also comes with many quirks that could raise issues for potential foreign operators. The country’s stringent labor requirements give workers broad rights to strike and initiate legal actions on firing, which could tie an employer up in Brazil’s complex legal system for months, if not years. These benefits for employees, among others, can drive up an employer’s payroll as much as 80 percent. Speaking of the legal side of doing business in Brazil, according to experienced attorney Robert Kohn, complaints which would be handled in the U.S. through a company’s customer service department are instead grounds for a lawsuit. The court system in Rio de Janeiro alone has processed nearly 500,000 small-claims lawsuits in a single year. Further, Brazil’s strict liability rules can complicate claims of defective products or employment practices, and a relatively short statute of limitations means issues must be addressed quickly. Last but certainly not least, Brazil’s labyrinthine tax structure also presents a challenge, as according to the World Bank it takes an average company about 2,600 hours per year to prepare its taxes.
As with any foreign country, Brazil’s unique business culture can take some getting used to for companies not used to doing business there. One of the easiest mistakes to make is focusing the conversation on how business is done in your own country. Many Brazilians carry a great deal of national pride and will be wary of dealing with partners who insist things be done “their way.” Admitting your nation’s shortcomings and agreeing where you can on areas where Brazil has the edge can give you a big credibility boost with Brazilian businesses.
Lunch, an important aspect of building business relationships anywhere in the world, is an almost sacred tradition in Brazil. Often stretching over two hours, the Brazilian lunch ritual eschews in-depth business talk in favor of personal conversation and enjoyment of the meal. Too much overt business discussion can be seen as an American stereotype to Brazilians who consider it bad for digestion. Social and cultural mores differ greatly in Brazil, with touching, hugging, and even kissing being more widely accepted in business relationships. Coffee is also a powerful tradition in Brazilian business, and closing a deal with of coffee is similar to a round of golf in the US. If offered a cup, your refusal could be seen as a message that you’re not entirely in sync with the Brazilian way of doing things.
The more intimate nature of business relationships in Brazil extends to debt recovery as well. When making collection calls, for example, a more personal approach can be more effective than a curt, straight to business phone call. While remaining professional, collectors calling to recover debt from Brazilians should strive to develop a rapport with their clients before getting down to the nitty gritty. Consider opening your collection calls with some personal discussion and friendly conversation before you inquire about payment or other business matters. Brazilian clients expect a more intimate level of communication and approaching your collections in a cordial, sociable manner can ensure a smooth transaction and a stronger business relationship.
Patience and Perspective for Business Success
As a major exporter of highly coveted commodities, Brazil enjoys a strong trade relationship with the United States, China, and other superpowers. It’s large land area and convenient geographic location, neighboring ten other emerging market countries, make it a promising business partner that can’t be ignored. However, the complicated infrastructure and cultural complexities can be challenging and even intimidating for foreign companies. Still, with patience, preparation, and education, you can ensure your venture into Brazilian business culture begins on the best foot possible.